I was having a conversation earlier today with a fellow classmate about socioeconomic diversity. The central question was, “Is Williams’ student body really diverse?” Doesn’t seem like it, my friend suggested. He pointed out the three (!) Tesla cars on campus that he saw in a couple of the student parking lots earlier this morning. “Mom’s Volvos,” as professors like to say.

Was my friend right? One way I thought of answering this question is by looking at the amount of loans Williams issues to students. Claim: Since Williams ended its no loan policy a decade ago and likes to say it has a more socioeconomically diverse student body, then the amount of loans owed to it by students increased over time (reasonable?).

According to the college’s financial statements (which I irritatingly spent quite a bit of time munging, since it’s only available as PDFs and (gasp) scans of printed paper) and assuming I am looking at the correct figure, it did not. Consider this plot of student loan receivables (the total amount owed to the college by students who take out loans) of every year since 2004:

It is decreasing! Does this mean that Williams students have been taking on fewer loans despite the repeal of the no loan policy a decade ago? If so, why would students in an increasingly socioeconomically diverse campus take on fewer loans when tuition increases far faster than the rate of inflation? If the student body is really becoming more socioeconomically diverse, then maybe the terms of the Williams loan are worse than outside loans so my classmates just borrow externally (I have a number of friends who do!). OR, maybe the number is declining because most of the student body don’t need to take on debt. Why would they, if they had the money? But that would imply the college, contrary to some official claims, is not more socioeconomically diverse. What do readers think?

Also, the student loan number comes with this footnote:

Under Statement of Financial Accounting Standards No. 107, Disclosure about Fair Value of Financial Instruments, the College is required to disclose fair value of student loans. Management believes that it is not practicable to determine the fair value of loans receivable because they are primarily federally sponsored student loans with U.S. government mandated interest rates and repayment terms subject to significant restrictions as to their transfer or disposition. College sponsored and donor provided loans are similarly restricted as to interest rate and disposition

I don’t know what this means (informed commentary please!). Perhaps the summers I spent in banking haven’t really prepared me to plow through the college’s financial statements just yet. As with the rest of the filings and my latest problem sets, I find this quite befuddling. On top of this there are also so many accounting changes and new categories year to year that are almost never properly explained/defined and are frequently shuffled around, so much so that a skeptic would think someone somewhere is obfuscating. Maybe only PWC (who audits these for the college) understands them. Any useful pointers/corrections/whatnot welcome, especially from those who are familiar with higher education financing!

UPDATE: I also looked at Bowdoin’s financial statements. Unfortunately it’s only available from 2011, but the trend is the same. Student loan receivables are also decreasing. Perhaps I am missing something? Informed commentary always welcome! Education doesn’t just end in the classroom!

6 Responses to “Student Loans and Socioeconomic Diversity”

Recall that Williams is still loan-free for people under a certain yearly household income — think the number is something like 70k.

So, it might be that loans going down because the student body consists more and more of some combination of the two people that don’t need or aren’t given loans: the very rich and the very poor (although, where Williams puts the line for “very poor” is questionable.)

Also worth mentioning that the richest and the poorest, all other things being equal, are probably the most likely to get in: rich kids can pay for better schooling, ECs, sports, etc. Poor kids get admissions preferences. Inbetweeners don’t really get a bump.

One reason Williams students maybe taking lesser loans is that richer students are being enrolled (but surely this is not what the Admission’s office meant when it said socioeconomic diversity!)

Could Williams be sponsoring more lower income students with more financial aid (or other means) instead of loans? This would explain fewer loans but increasing diversity. This would be consistent with @GuessinEph’s claim that social diversity is missing out on “inbetweeners”. Relevant metrics would be insightful here.

Depends on your definitions. Extensive coverage, and excellent data, in this series. Summary: 1/5th of Williams students come from the top 1% and 1/5th from the bottom 60%.

Does this mean that Williams students have been taking on fewer loans despite the repeal of the no loan policy a decade ago?

No. Loans are confusing and the College actually has some interesting data. I bet that, if you made an appointment with Dukes Love, he would be happy to discuss. The short version is that students can borrow from many different lenders besides Williams, the most important of which is the Federal Government. So, just looking at Williams loan balances — although very interesting and thanks for doing so! — does not tell the whole story.

Hmm. I just read further into your post and now I am confused! Why would Federal loans like Stafford be on the Williams books? Is this a cash flow thing?

It just means they are giving out more direct aid as their financial position has improved from when they dropped the policy 10 years ago. They have to given the school’s location and competition from better brands in the Ivy’s and a few other top schools. Hard truth-no need to over analyze.